The corporate takeover of Labour is complete

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Hi Diogenes,

Last night Rachel Reeves gave a speech at Mansion House, in which she made clear the Labour government is fully invested in the City, thanks in no small part to the City's own considerable investments in Labour.

Today our Investigative Reporter Ethan Shone brings you his analysis of Reeves' speech and what it means for those in the country who aren't in big finance.

Spoiler alert - the gains will be private, but the losses will be public.

Find out more below.

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FEATURED STORY

The City's big investment in Starmer's Labour is about to pay dividends

Ethan Shone

The big question that has increasingly dogged Labour throughout its first year in power, as it lurched from one crisis to the next, putting noses out of joint among everyone from private school parents to PIP claimants, is who is this government actually for?

With Rachel Reeves' Mansion House speech last night, we may finally have got our answer – although the clues were there all along.

This is government (paid) for and by the City.

How else to explain the chancellor's view that the way to rescue the British economy, drive up living standards and put more cash in the pockets of working people, who largely have little or no savings to speak of, is to let banks more easily hawk overpriced 'investment opportunities'?

The finance industry itself could hardly have written a speech more suited to its ends than the one Reeves delivered in Leeds. Though that might just be because most of the actual policies that comprise her reforms were dreamt up in the industry's own policy departments; LinkedIn is this morning ablaze with banking wonks taking credit for everything but the applause breaks.

But how did this happen? How did the major political party designed to be the working class's bulwark against the financial might of the speculators end up with an economic programme of reheated trickle-down? (Which was first briefed to The Sun newspaper in decidedly Thacherite terms, for good measure.)

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The glaring but little acknowledged truth is that over the past five years or so, Labour has been subject to the kind of takeover that would make all but the most barbarian of corporate raiders blush. As the blueprint for this kind of thing is well worn, we can clearly chart out the different phases of this buyout.

Amid general public dissatisfaction as the UK neared 15 years of Tory rule, Labour – an undervalued party with weak management – was identified by the finance industry as a target, and the work began. With little notice paid by the media, bankers and financiers started to replace trade unions and small donors as the party's primary backers.

Since 2020, the party has accepted support worth around £16m from people and organisations with direct ties to the finance industry. These donors include hedge fund boss Martin Taylor, an early backer of Labour Together – the quasi-superpac which has played an instrumental role in this 'takeover' – and Cayman Islands-controlled Quadrature Capital, which gave the party its largest single donation ever (£4m) during the election, opportunely timed to avoid disclosure until long after polling day.

With so much capital tied up in a venture, it makes sense to have your own people on the inside to ensure matters are progressing to your liking; the raider must establish and secure control within the entity. So then came the staff. A small army of secondees was embedded in the offices of half Labour's front bench, sent and paid for by banks (HSBC, NatWest), consultancies (PWC, Grant Thornton, EY, Oliver Wyman) and lobbyists (FGS, Weber Shandwick, Teneo) – all of whom are heavily invested in the fate of the finance industry.

And that's not to mention the significant shift in party personnel. A selection process tightly controlled by the leadership's hatchet men has resulted in a Parliamentary Labour Party with more hedge fund lawyers and finance wonks than shop stewards.

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For many of these new Labour MPs, the work must feel strikingly familiar. Callum Anderson, whose previous job was lobbying for the London Stock Exchange Group, has devoted much of his energies from the backbenches toward promoting retail investment in the domestic market, AKA the interests of the London Stock Exchange Group. Emma Reynolds, now the minister charged with regulating the City, often finds herself at the other side of the same tables she sat around as chief lobbyist for TheCityUK, where her role was to push for the very same lighter-touch regulation that she now implements.

Labour's election in July 2024 marked a shift; the money spent by City interests on securing the party's victory represented a significant investment. Now, we are beginning to see the many ways in which that investment will start to pay dividends.

With last night's speech came confirmation that the takeover is complete. Now fully retooled and repurposed to maximise profits, Labour PLC can begin the process of asset stripping and value extraction: slashing red tape, derisking finance, liberalising pensions, and funnelling more and more capital into the markets.

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As we are seeing, this Labour government understands its primary role as that of a profit-maximiser for the private sector, and big finance in particular. As such, the returns will be rich, but only for those holding equity in the venture. Everyone else will be left clutching worthless shares in a political project that once promised transformation, and instead delivered management consultancy.

What next? Anyone familiar with the private equity buyout model knows the answer. Once the profits have been extracted and the company (or in this case, the UK) has been loaded up with debt, the raider will leave, flush with the proceeds of another perfectly executed takeover.

And when it all results in another misselling scandal, speculative bubble or other, new type of financial catastrophe brought on by this deregulatory bonanza, the cost of collapse won't be borne by the buyers, they'll be long gone, moved on to the next purchase. And Labour's senior figures will no doubt have their falls softened with golden parachutes, in the form of cushy advisory gigs and lucrative spots on the after-dinner speaker's circuit. The rest of us won't be so lucky.

The gains will have been private, but the losses will be public.